Partnership received 120 days to make section 754 election

Plain-English summary

A partnership had transfers of ownership interests during a taxable year and intended to make a section 754 election to adjust the basis of partnership property. Its tax adviser inadvertently failed to include the election with the partnership return. The partnership represented that it acted reasonably and in good faith, was not using hindsight, and that relief would not prejudice the government. The IRS found the regulatory-relief standards satisfied and granted 120 days to file a written election effective for the specified year and later years.

Ruling snapshot

• Request: Extend the deadline for a section 754 partnership basis-adjustment election
• Outcome: Approved; 120 days to file the election
• Key authorities: I.R.C. §§ 734, 743, 754; Treas. Reg. §§ 1.754-1, 301.9100-1, 301.9100-3

Full text (IRS public release)

Internal Revenue Service                                   Department of the Treasury
                                                           Washington, DC 20224

Number: 201543002                                          Third Party Communication: None
Release Date: 10/23/2015                                   Date of Communication: Not Applicable
Index Number: 754.02-00, 9100.15-00
                                                           Person To Contact:
---------------------------------------------------        -----------------------------, ID No. -------------
-------------------------                                  -----------------
-----------------------                                    Telephone Number:
 ----------------------------------                        ----------------------
                                                           Refer Reply To:
                                                           CC:PSI:01
                                                           PLR-102489-15
                                                           Date:
                                                           July 22, 2015


Legend

X     = ------------------------------------------------------------------------------------------------------
        --------------------------
State = --------------
Year = -------


Dear -------------:

       This responds to a letter dated January 14, 2015, and subsequent
correspondence, submitted on behalf of X, requesting an extension of time under
§ 301.9100-3 of the Procedure and Administration Regulations for X to make an
election under § 754 of the Internal Revenue Code.

                                                      FACTS

      According to the information submitted, X was formed as a limited liability
company under the laws of State and is classified as a partnership for federal tax
purposes. In Year, interests in X were purchased and sold. X represents that it
intended to make a § 754 election for Year, but its tax advisor inadvertently failed to
make the election with its information return for Year. X further represents that it acted
reasonably and in good faith, that granting relief will not prejudice the interests of the
government, and that it is not using hindsight in making this election.

                                              LAW & ANALYSIS

       Section 754 provides that if a partnership files an election, in accordance with the
regulations prescribed by the Secretary, the basis of the partnership property is
adjusted, in the case of a transfer of a partnership interest, in the manner provided in
§ 743. Such an election shall apply with respect to all distributions of property by the
PLR-102489-15                                 2

partnership and to all transfers of interests in the partnership during the taxable year
with respect to which the election was filed and all subsequent taxable years.

Section 1.754-1(b) of the Income Tax Regulations provides that an election under § 754
to adjust the basis of partnership property under §§ 734(b) and 743(b) with respect to a
distribution of property to a partner or a transfer of an interest in a partnership, shall be
made in a written statement filed with the partnership return for the taxable year during
which the distribution or transfer occurs. For the election to be valid, the return must be
filed not later than the time prescribed by § 1.6031-1(e) (including extensions thereof)
for filing the return for the taxable year.

Section 301.9100-1(c) provides that the Commissioner may grant a reasonable
extension of time to make a regulatory election, or a statutory election (but no more than
6 months except in the case of a taxpayer who is abroad), under all subtitles of the
Internal Revenue Code except subtitles E, G, H, and I. Section 301.9100-1(b) defines
the term “regulatory election” as an election whose due date is prescribed by a
regulation published in the Federal Register or a revenue ruling, revenue procedure,
notice, or announcement published in the Internal Revenue Bulletin.

Section 301.9100-1 through 301.9100-3 provide the standards the Commissioner will
use to determine whether to grant an extension of time to make the election. Section
301.9100-2 provides the rules governing automatic extensions of time for making
certain elections. Section 301.9100-3 provides the standards the Commissioner will
use to determine whether to grant an extension of time for regulatory elections that do
not meet the requirements of § 301.9100-2. Under § 301.9100-3, a request for relief will
be granted when the taxpayer provides evidence to establish to the satisfaction of the
Commissioner that (1) the taxpayer acted reasonably and in good faith, and (2) granting
relief will not prejudice the interests of the government.

                                      CONCLUSION

Based solely on the information submitted and the representations made, we conclude
that the requirements of §§ 301.9100-1 and 301.9100-3 have been satisfied. As a
result, X is granted an extension of time of 120 days from the date of this letter to make
an election under § 754 effective for Year and thereafter. The election should be made
in a written statement filed with the appropriate service center for association with X’s
Year return. A copy of this letter should be attached to the election.
PLR-102489-15                              3

        Except as specifically set forth above, no opinion is expressed concerning the
federal tax consequences of the facts described above under any other provision of the
Internal Revenue Code and the regulations thereunder. This ruling is directed only to
the taxpayer requesting it. Section 6110(k)(3) of the Code provides that it may not be
used or cited as precedent. In accordance with the power of attorney on file with this
office, copy of this letter is being sent to X’s authorized representative.

                                    Sincerely,

                                    Associate Chief Counsel
                                    (Passthroughs & Special Industries)



                                 By: Joy C. Spies
                                    Joy C. Spies
                                    Senior Technician Reviewer, Branch 1
                                    Office of the Associate Chief Counsel
                                    (Passthroughs & Special Industries)

Enclosures (2)
 Copy of this Letter
 Copy for 6110 purposes